employee share purchase scheme means a scheme established by an unlisted company under which eligible persons may acquire specified equity securities issued by that company

FRS–24 means the financial reporting standard known as Financial Reporting Standard No 24 (Interim Financial Statements) that has been approved under the Financial Reporting Act 1993

NZ IAS 34 means the financial reporting standard known as the New Zealand Equivalent to International Accounting Standard 34 (Interim Financial Reporting) that has been approved under the Financial Reporting Act 1993

specified equity securities means any interest in or right to an ordinary share in an unlisted company offered under its employee share purchase scheme

unlisted company means a company incorporated in New Zealand that is not a party to a listing agreement with New Zealand Exchange Limited.

(2)Any term or expression that is defined in the Act or the Regulations and used, but not defined, in this notice has the same meaning as in the Act or the Regulations.

5Exemptions

An unlisted company, any of its subsidiaries, a trustee of that company's employee share purchase scheme, and any person acting on their behalf, are exempted from the following provisions in respect of specified equity securities:

(c)clause 21 of Schedule 1 of the Regulations, to the extent that it requires the registered prospectus to contain the dates, time periods, and price terms relevant to the particular offer under the employee share purchase scheme and information personal to the person to whom the registered prospectus is distributed; and

6Condition that equity securities allotted only to eligible persons

The exemptions in clause 5 are subject to the condition that the specified equity securities are allotted only to the following persons:

(a)persons who are eligible persons at the time of allotment of the equity securities:

(b)in the case of equity securities that are allotted on the exercise of rights or options to acquire shares, persons who are eligible persons at the time of allotment of those rights or options.

7Condition that information sent to subscribers

The exemptions in clause 5 are subject to the condition that, before an eligible person or a person referred to in clause 6(b) subscribes for specified equity securities, the unlisted company provides that person with the following:

(a)a copy of the most recent audited consolidated financial statements of the issuing group that comply with the Financial Reporting Act 1993; and

(b)if the specified equity securities are offered more than 9 months after the date of the most recent audited consolidated financial statements of the issuing group, a copy of interim financial statements for the most recently completed financial half-year of the issuing group that complies with FRS-24 or NZ IAS 34; and

(c)the company's most recent annual report, which includes or is accompanied by a statement setting out the following matters:

(i)particulars of entries in the interests register concerning directors of the company made during the accounting period to which the report relates; and

(ii)the date of, names of the parties to, and general nature of any material contract (excluding a contract entered into in the ordinary course of business) entered into by a member of the issuing group at any time in the 2 years preceding a date not more than 20 working days before the date of circulation of the annual report; and

(iii)a brief description of any legal proceedings or arbitrations concerning the issuing group that are pending at a date not more than 20 working days before the date of circulation of the annual report and that might have a material adverse effect on the issuing group; and

(iv)a statement by 2 directors of the company as to whether, after inquiry by them in relation to the period between the date of the latest statement of financial position attached to, or contained in, the annual report and a date not more than 20 working days before the date of circulation of the annual report, there have, in their opinion, arisen any circumstances that materially adversely affect the issuing group's—

(A)trading or profitability; or

(B)asset value; or

(C)ability to pay liabilities due within the next 12 months.

8Condition about sale arrangements

The exemptions in clause 5 are subject to the condition that the investment statement relating to the specified equity securities must contain a description of the arrangements under which persons who hold specified equity securities can sell those securities (before and after they cease to be eligible persons).

9Condition that terms of employee share purchase scheme available

The exemptions in clause 5 are subject to the condition that the investment statement relating to the specified equity securities contains—

(a)a brief description of the terms of the employee share purchase scheme; and

(b)a statement of the place or places where the terms of the employee share purchase scheme are available free of charge to a person who is able to acquire securities under the scheme.

10Condition that there is either established market or repurchase offer by unlisted company

(a)there is an established market for the specified equity securities; or

(b)the unlisted company offers to repurchase the specified equity securities under the Companies Act 1993 from eligible persons when they cease to be eligible persons (so long as at that time the company satisfies the solvency test set out in section 4 of the Companies Act 1993).

11Condition of cap on specified equity securities

(a)the number of specified equity securities allotted in any 12-month period is capped at 5% of the ordinary shares of the company; and

(b)the total number of specified equity securities held by eligible persons or persons referred to in clause 6(b) is capped at 15% of the ordinary shares of the company.

(2)Calculations of the number of specified equity securities for the purposes of subclause (1) must exclude the specified equity securities allotted to or held by or on behalf of directors of the unlisted company and any other person who—

(a)is, at the commencement of any year, a wealthy or experienced person under section 5 of the Act; or

(b)would not be regarded as a member of the public under the Act.

12Condition of exemptions from clause 1(3) and (4) of Schedule 1 of Regulations

The exemptions in clause 5 from clause 1(3) and (4) of Schedule 1 of the Regulations are subject to the further condition that the registered prospectus states—

(a)the cap on the specified equity securities that can be allotted under the employee share purchase scheme; and

(b)the formula or method by which the price or consideration for the specified equity securities will be determined.

13Conditions of exemption from clause 21 of Schedule 1 of Regulations

The exemption in clause 5 from clause 21 of Schedule 1 of the Regulations is subject to the further conditions that—

(a)a document is given to every person who is offered specified equity securities under the employee share purchase scheme that contains any information that would but for this exemption be required by clause 21 of Schedule 1 of the Regulations to be contained in the registered prospectus; and

(b)the registered prospectus contains all other terms of the offer and of the specified equity securities except—

(i)those implied by law; or

(ii)those set out in the document that is registered with a public official and is available for inspection and referred to in the registered prospectus.

14Condition of exemption from clause 5(1)(c) of Schedule 3D of Regulations

The exemption in clause 5 from clause 5(1)(c) of Schedule 3D of the Regulations is subject to the further condition that a document containing the information required by clause 5(1)(c) of Schedule 3D of the Regulations is given to every person to whom the specified equity securities are offered under the employee share purchase scheme.

15Condition of exemption from regulation 17 of Regulations

The exemption in clause 5 from regulation 17 of the Regulations is subject to the further condition that the unlisted company has complied with regulation 17 of the Regulations in relation to another advertisement and the only difference between the 2 advertisements is information personal to a person to whom the advertisement is distributed.

•the exemptions recognise that the circumstances of employee share purchase scheme offers differ from many other offers in that they involve an ongoing scheme for the distribution of securities to persons who have a relationship with the issuer:

•most unlisted companies do not meet the Securities Commission's current policy requirements for being named as specified unlisted companies in the Schedule to the class notice for employee share purchase schemes (SR 2002/320):

•the conditions of the exemptions require that the level and nature of the disclosure and the entry and exit arrangements for participants are appropriate for the particular employee share purchase scheme:

•the exemptions help to minimise compliance costs for issuers offering these schemes on a continuous basis.

Contents

1General

2About this eprint

3List of amendments incorporated in this eprint (most recent first)

Notes

1General

This is an eprint of the Securities Act (Employee Share Purchase Schemes–Unlisted Companies) Exemption Notice 2005. It incorporates all the amendments to the Securities Act (Employee Share Purchase Schemes–Unlisted Companies) Exemption Notice 2005 as at 1 April 2011. The list of amendments at the end of these notes specifies all the amendments incorporated into this eprint since 4 September 2007. Relevant provisions of any amending enactments that contain transitional, savings, or application provisions are also included, after the Principal enactment, in chronological order.